Panama Canal Expansion

After a decade of theorising and debate, the reality of how Panama Canal expansion will impact shipping is finally at hand.

The ‘neo-Panamax’ era is about to begin, and it is increasingly obvious that the shipping effects will be far more acute in some sectors than in others. In the container shipping market, major changes are already afoot. Liner operators are upgraded their vessels immediately to take advantage of the expanded locks. In other sectors, such as LNG and LPG, the use of the expanded Panama Canal – or the decision to bypass it – will be driven by cargo interests, not vessel operators.

News & Analysis

Container ship operators have shifted the focus from what are now medium-sized vessels to mega and ultra-large container vessels. IHS Markit figures show the decline in orders for the middle-sized ships, while orders for feeders and larger vessels have doubled in the past five years.

In the 11 months since the debut of Panama Canal’s larger locks, demand for ‘neo-Panamax’ transit slots has been higher than expected, driven by LPG cargoes from the United States to Asia and a rapid upsizing of container ships.

The Caribbean has had little difficulty handling the larger vessels calling since the expanded Panama Canal opened in June. The next test comes in 2017, when container lines unveil major changes to their regional networks.